Pennichuck Corporation (NASDAQ: PNNW) today announced that it has
entered into a definitive merger agreement ("Merger Agreement")
with the City of Nashua, New Hampshire ("City") pursuant to which
the City will, subject to a number of conditions precedent and
contingencies, purchase all of the outstanding common stock and
common stock equivalents of the Company for $29.00 per share, or
approximately $138 million, in cash. After taking into account the
Company's outstanding debt, the transaction represents a total
enterprise value of approximately $200 million.
While the Merger Agreement was executed and made effective on
November 11, 2010, under New Hampshire law an affirmative vote of
not less than two-thirds of the City's Board of Aldermen within the
time period set by law (as explained below) is required to approve
and ratify the Merger Agreement and the related financing.
Accordingly, unless and until such a timely positive vote is
obtained, the Merger Agreement is not binding on the City in any
respect.
Consummation of the transaction is also subject to advance
approval by the New Hampshire Public Utilities Commission ("NHPUC")
pursuant to New Hampshire law, including the state's utility
municipalization statute RSA 38 and special 2007 legislation
relating to the City's right to purchase and hold the Company's
common stock. The Company cannot predict how or when the NHPUC will
rule on the transaction. However, the Company believes the review
process, which is expected to include notice to interested parties,
public hearings, discovery and testimony by the City, the Company
and other interested parties, may extend into the second half of
calendar 2011. The City's obligation to complete the transaction is
subject to there being no approval conditions imposed by the NHPUC
that would materially adversely affect the City's expected economic
benefits from the transaction.
The Company and the City intend that this transaction be in full
settlement of their eminent domain dispute and the related
proceeding currently before the NHPUC pursuant to which the City
has been attempting to take by condemnation (i.e., eminent domain)
the operating assets of the Company's Pennichuck Water Works, Inc.
regulated utility subsidiary ("PWW"). Under New Hampshire statute
RSA 38:13, in the case of a condemnation taking or an agreed sale
under threat of condemnation, "the final determination of the price
to be paid" triggers a 90-day period within which the municipality
must decide by vote of its governing body if it wants to consummate
the acquisition. It is the Company's contention that with respect
to events occurring prior to the November 11, 2010 effective date
of the Merger Agreement, including the March 2010 decision of the
New Hampshire Supreme Court affirming the order of the NHPUC, there
was no final determination of the price and, therefore, the 90-day
period was not triggered. If this is ultimately determined to be
incorrect, the Company and the City may be precluded, by operation
of state law, from entering into a consensual settlement agreement
for a period of two years and then only after obtaining a new
majority public vote. For more information on this topic, see the
Company's press releases issued on June 2 and July 1, 2010, the
related Form 8-K filings with the U.S. Securities and Exchange
Commission (the "SEC"), and the Company's Quarterly Report on Form
10-Q for the quarter ended September 30, 2010, also filed with the
SEC.
The Company believes that the November 11, 2010 effective date
of the Merger Agreement first established the required final
determination of price and has now triggered the commencement of
the 90-day period. Accordingly, pursuant to the terms of the Merger
Agreement, the City has agreed that, after public hearings are held
and within this 90-day period, its Board of Aldermen will meet to
take a vote pursuant to RSA 38:13. As previously explained, an
affirmative vote of not less than two-thirds of the City's
Aldermanic Board is required to approve and ratify the Merger
Agreement, as well as the related financing. By operation of law,
until and unless such a positive vote is obtained, the Merger
Agreement is not binding on the City in any respect. If the City's
Aldermanic Board does not vote in favor of the Merger Agreement,
the Company will have no recourse against the City under the terms
of the Merger Agreement, except that the pending eminent domain
proceeding would then be terminated. The Company does not intend to
file its proxy statement relating to the proposed merger unless the
City's Aldermanic Board votes in favor of the Merger Agreement.
Pursuant to the terms of the Merger Agreement, the Company may
continue paying regular quarterly dividends until the closing date
at a rate no greater than the current annualized rate of $0.74 per
common share. The Company has suspended, however, its dividend
reinvestment plan. Separately, PWW and the Company's Pittsfield
Aqueduct Company, Inc. regulated utility subsidiary will continue
their currently active rate relief cases before the NHPUC.
Closing of this transaction is also subject to (i) approval by
the holders of not less than two-thirds of the outstanding shares
of the Company's common stock, and (ii) Nashua's ability to obtain
appropriate financing after all conditions precedent (including
those specified above and other customary closing conditions) have
been met. While the City's financing structure is subject to change
by the City, the Company currently expects that the City will
finance the acquisition by issuing general obligation bonds, the
interest on which will be taxable under federal and state law.
Commenting on the acquisition transaction, Duane C. Montopoli,
Pennichuck's President and Chief Executive, said, "While we believe
the NHPUC got the 2008 valuation of PWW's assets and the amount of
the mitigation reserve about right, this stock sale will enable our
shareholders to avoid double-taxation and the City will acquire
more assets at a lower total cost than would apply in a
condemnation taking. Consequently, this is a true win-win outcome
for both the Company's shareholders and the citizens of
Nashua."
He added, "I am also particularly pleased that we have been able
to resolve this dispute in a manner that will allow our workforce
to continue providing exceptional service to the customers and
communities we serve."
Also commenting on this development, Dr. John R. Kreick,
Pennichuck's Chairman, said, "While more remains to be done,
reaching this agreement with the City of Nashua is a significant
event. I would like to congratulate the teams from the City and the
Company who have accomplished this task. I would especially like to
thank the Pennichuck employees, who have continued to reliably
provide safe water for our customers, despite the uncertainty
created by the eminent domain procedures. Job well done and keep up
the good work."
While the Company and the City are committed to completing this
transaction as quickly as possible, it is not possible to predict
whether all the approvals, contingencies and other conditions
precedent to closing will be obtained, resolved or satisfied, as
applicable, and therefore if and when the transaction will close.
The Company and the City have concurrently entered into a
Settlement Agreement which ensures that the current eminent domain
proceeding brought by the City against the Company will be
terminated even if the proposed acquisition ultimately is not
completed.
Advising the Company on this matter are Boenning &
Scattergood, Inc., McLane, Graf, Raulerson & Middleton P.A.,
and Nutter, McClennen & Fish LLP.
About Pennichuck Corporation
Pennichuck Corporation is a holding company involved principally
in the supply and distribution of potable water in New Hampshire
through its three regulated water utilities. Its non-regulated,
water-related activities include operations and maintenance
contracts with municipalities and private entities in New Hampshire
and Massachusetts. The Company's real estate operations are
involved in the ownership, management and commercialization of real
estate in southern New Hampshire.
Pennichuck Corporation's common stock trades on the Nasdaq
Global Market under the symbol "PNNW." Upon completion of the
transaction, Pennichuck's common stock will cease to be publicly
traded. The Company's website is at www.pennichuck.com.
Forward-Looking Statements
This news release may contain certain forward-looking statements
with respect to the financial condition, results of operations and
business of Pennichuck Corporation. Forward-looking statements are
based on current information and expectations available to
management at the time the statements are made, and are subject to
various factors, risks and uncertainties that could cause actual
results to differ materially from those expressed or implied by
such forward-looking statements. These factors include, but are not
limited to, a future judicial or regulatory determination that
events prior to the November 11, 2010 effective date of our merger
agreement with the city of Nashua constituted a final determination
of the price to be paid under RSA 38:13 and triggered the statutory
90-day period within which Nashua was required to decide whether to
take, by eminent domain, the assets of our Pennichuck Water Works,
Inc. subsidiary; the expiration of said 90-day period without
Nashua having made any such decision; the outcome of requests for
rate relief from the NHPUC from time to time; the implications of
the New Hampshire Supreme Court's March 25, 2010 decision affirming
the eminent domain order of the NHPUC in favor of the City of
Nashua; the impact of an eminent domain taking by Nashua on
business operations and net assets; legislation and/or regulation
and accounting factors affecting Pennichuck Corporation's financial
condition and results of operations; the availability and cost of
capital, including the impact on our borrowing costs of changes in
interest rates; and, the impact of weather. Investors are
encouraged to access Pennichuck Corporation's annual and quarterly
periodic reports filed with the Securities and Exchange Commission
for financial and business information regarding Pennichuck
Corporation, including a more detailed discussion of these and
other risks and uncertainties that could affect Pennichuck
Corporation's forward-looking statements. We undertake no
obligation to update or revise publicly any forward-looking
statement.
Additional Information and Where to Find
It
Pennichuck Corporation plans to file with the U.S. Securities
and Exchange Commission and mail to its shareholders a proxy
statement in connection with the transaction (the "Proxy
Statement"). The Proxy Statement will contain important information
about Pennichuck Corporation, the proposed acquisition by the City
of Nashua and related matters. EXISTING AND PROSPECTIVE PENNICHUCK
CORPORATION SECURITY HOLDERS ARE URGED TO READ THE PROXY STATEMENT
REGARDING THE PROPOSED TRANSACTION WHEN IT BECOMES AVAILABLE AND
ANY OTHER RELEVANT DOCUMENTS FILED WITH THE SEC, AS WELL AS ANY
AMENDMENTS OR SUPPLEMENTS TO THOSE DOCUMENTS, BECAUSE THEY WILL
CONTAIN IMPORTANT INFORMATION ABOUT THE PROPOSED TRANSACTION.
Pennichuck Corporation security holders will be able to obtain
free copies of the Proxy Statement and other documents filed with
the SEC by Pennichuck Corporation through the web site maintained
by the SEC at www.sec.gov. In addition, documents filed by
Pennichuck Corporation with the SEC, including filings that will be
incorporated by reference in the Proxy Statement, can be obtained,
without charge, upon written request addressed to Roland E.
Olivier, Secretary, Pennichuck Corporation, 25 Manchester Street,
Merrimack, New Hampshire 03054.
Participants in the Solicitation
Pennichuck Corporation, its directors, executive officers and
other members of management, and the City of Nashua and its
officials and employees may be deemed to be participants in the
solicitation of proxies in respect of the acquisition contemplated
by the merger agreement. Information regarding Pennichuck
Corporation's directors and executive officers is contained in
Pennichuck Corporation's Annual Report on Form 10-K for the year
ended December 31, 2009, as filed with the SEC on March 4, 2010,
and its proxy statement for its 2010 annual meeting, as filed with
the SEC on March 26, 2010. Information about the City and its
officials can be found at http://www.gonashua.com. Additional
information regarding the interests of those participants may be
obtained by reading the Proxy Statement regarding the proposed
transaction when it becomes available. EXISTING AND PROSPECTIVE
SECURITY HOLDERS SHOULD READ THE PROXY STATEMENT AND OTHER
DOCUMENTS TO BE FILED WITH THE SEC CAREFULLY BEFORE MAKING AN
INVESTMENT DECISION WITH RESPECT TO PENNICHUCK CORPORATION
SECURITIES.
For More Information, Contact: Duane C. Montopoli
President and Chief Executive Officer Phone: 603-913-2300 Fax:
603-913-2305
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